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Failure to comply with loan terms - not a barrier for receiving next tranche

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April 22, 2016 18:23

The tranche is allocated despite non-fulfillment of its conditions. Russia has once again demonstrated conventionality of the obligations under the loan agreement and postponed the issue of Belarus’ state property sale for 2013.

On December 7th, at the ACF EurAsEC Council meeting it was decided to disburse the fourth USD 440 million tranche to Belarus.

At least three parameters indicated in a letter of intent to the EurAsEC Anti-Crisis Fund were not fulfilled. The growth in total bank loans in the economy has not been implemented, despite the transfer of some state-owned banks’ assets to the Development Bank. The requirement concerning the level of reimbursement by the population for the utilities and public transport tariffs has not been met once again. 

The country, which makes the final decision about the allocation of the loan’s next tranche, is Russia, because she remains the principal donor of the Fund. The allocation of the tranche is justified by some minor adjustments to the parameters that were not fulfilled. In fact, Russia focuses only on one indicator important for her, i.e. budget revenues from the sale of state property. All other parameters she considers supplementary and minor and adjustable.

The loan conditions oblige Belarus to sell government property worth USD 2.5 billion in 2012 and this condition has not been fulfilled. In summer 2012 this requirement was adjusted and linked to the allocation of the loan’s fifth tranche. In the meanwhile, the fifth and the sixth tranches had already been budgeted by Belarus in 2013. Understanding the importance of both tranches for Belarus and the significance of external debt payments by Belarus in 2013, Russia shifted the negotiations about tranches’ conditions to a more favorable period for herself, not exacerbating the issue in 2012.

Thus, the loan and its allocation are conditioned by privatization of Belarus’ state property, rather than fulfillment of individual parameters. It is assumed that Russian companies should have a priority, although this is denied by both parties. Belarus’ reluctance to sell SOEs will result in delayed loan allocation terms or in new loan conditions for Belarus.

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